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The Impact of Union Budget 2023 on Logistics and Infrastructure Development

Industrial Parks, In city Warehousing, logistics and Infrastructure

With a focus on transforming the logistics sector and bolstering its position in the global supply chain, the Union Budget 2023 has drawn accolades from industry experts. The significant steps taken by the government to enhance connectivity, invest in infrastructure, promote sustainability, and strengthen skill development have set the stage for an exciting period of growth and innovation in the logistics sector.

India’s logistics market is estimated to be USD 435.43 Bn in 2023, states a Research and Markets analysis¹. By 2028 it is expected to reach USD 650.52 Bn, growing at a CAGR of 8.36 per cent. The bevy of Budget incentives and policies look more promising than ever for private investors in the logistics space.

Industrial Parks, In city Warehousing, logistics and Infrastructure

Policy Propulsion

India’s Union Budget 2023-2024 presents an optimistic outlook for the Indian logistics sector. Policy measures for improving connectivity, bolstering infrastructure, and promoting sustainability, set the stage for accelerated growth and transformation in the logistics industry. Allocations have been made to enhance connectivity between ports and hinterlands, facilitate investment in warehousing and cold storage facilities, incentivize the establishment of logistics parks, launch a National Logistics Portal, and prioritize green energy and skill development. This comprehensive approach reflects the government’s commitment to creating a robust and sustainable logistics ecosystem that will propel India’s position as a global logistics hub.

Capital Investment Outlay

The logistics industry got a much-needed stimulus with the government’s proposal to increase the capital investment outlay by 33 percent to INR 10 lakh crore in the Union Budget 2023–24.

The direct capital investment is complemented by the provision for creating capital assets through grants-in-aid to the states.

In a move to spur investments in infrastructure and to incentivise the states for necessary policy actions, the 50-year interest-free loan to state governments is being continued for one more year, with the outlay being substantially enhanced to INR 1.3 lakh crore (4.5% of the GDP).

The newly established Infrastructure Finance Secretariat will assist all stakeholders with more private investment in infrastructure sectors like railways, roads, urban infrastructure, and power.

Enhancing Connectivity and Infrastructure:

The budget’s emphasis on improving connectivity between ports and hinterlands is being hailed as a game-changer for the logistics industry. Investments in transportation infrastructure, including the development of dedicated freight corridors and advanced technological solutions, are expected to significantly reduce transit time and enhance efficiency. This heightened connectivity will enable seamless movement of goods and improve trade competitiveness.

Investment in Warehousing and Cold Storage Facilities:

The allocation of resources towards warehousing and cold storage facilities is a crucial step towards enhancing India’s logistics capabilities. State-of-the-art facilities equipped with advanced technology and automation systems will ensure efficient storage and preservation of goods. This move will not only reduce post-harvest losses but also foster food security and enable smoother supply chain operations.

Industrial Parks, In city Warehousing, logistics and Infrastructure

Incentives for Logistics Parks:

The budget’s focus on incentivizing the establishment of logistics parks has garnered widespread applause from the industry. By offering attractive benefits such as tax incentives, streamlined approval processes, and reduced regulatory barriers, the government aims to encourage private sector participation in logistics infrastructure development. These logistics and industrial parks, equipped with world-class infrastructure and integrated multimodal connectivity, will serve as hubs for seamless cargo movement.

This also leads to the state cabinet of Goa having paved the way for logistics-led investments by granting approval to the Goa Logistics and Warehouse Policy, 2023 in May 2023.

The policy states that incentives will be offered on fixed capital invested through loan building for integrated logistics parks, large warehouses, and cold storage facilities. It also proposes institutional and regulatory frameworks to provide time-bound clearances to logistics-led investments in the state.

It is a step in the right direction for ease of doing business in Goa, streamlining regulatory procedures, and making the warehousing sector more agile.

National Logistics Portal:

The introduction of a National Logistics Portal has been hailed as a transformative move that will enhance transparency and streamline logistics operations. This digital platform will serve as a one-stop solution for stakeholders, providing real-time information on cargo tracking, documentation, customs clearance, and logistics service providers. The portal’s implementation will eliminate paperwork, reduce inefficiencies, and enable efficient decision-making, fostering a more agile and connected logistics ecosystem.

Emphasis on Sustainability and Skill Development:

The budget’s commitment to green energy and skill development underscores the government’s vision for a sustainable future and competent logistics workforce. Investments in renewable energy sources within the logistics sector will reduce carbon emissions and align India’s logistics industry with global sustainability goals. Concurrently, the focus on skill development programs will empower the workforce with the necessary expertise to adapt to evolving industry demands and drive innovation.

Production-Linked Incentives (PLI) Scheme:

The PLI scheme is the government’s flagship programme introduced in 2020 to give large-scale manufacturing a fillip. Incentives are offered to manufacturers of Indian products when incremental sales are made. It encompasses 14 categories with an estimated capex of INR 4 lakh crore (US$ 48.8 billion) over the next five years.

The Budget 2023-24 has earmarked INR 8,083 crore for PLI schemes, the bulk of which is sanctioned for large-scale electronics manufacturing, pharma, auto and auto components, and food processing.

A chunk of the budget allocation of INR 4,499 crore is for PLIs in large-scale electronics manufacturing including premium mobile devices.
The pharma sector got the second largest PLI allotment at INR 1,200 crore. Of the funds allotted for the manufacture of pharmaceutical products, INR 100 crore each has been set aside for medical devices and for the promotion of domestic manufacturing of crucial raw materials.

The Budget has additionally sanctioned INR 604 crore to PLI schemes in auto and auto components.

Ease of Doing Business

In a landmark move to enhance the Ease of Doing Business sentiment in the country, the Union Budget 2023-24 reduced 39,000 compliances and decriminalised 3,400 legal provisions. It mulled setting up a single window IT system for registration and approval from IFSCA, SEZ authorities, GST network, RBI, SEBI and IRDAI.

Conclusion:

The Indian Union Budget 2023 has received support from the logistics sector. With measures aimed at improving connectivity, investing in infrastructure, promoting sustainability, and fostering skill development, the government has demonstrated its commitment to enhancing India’s position in the global supply chain. The budget’s provisions will enable the logistics industry to thrive, empower businesses, and unlock immense potential for India’s economic growth in the coming years.